RHB Research retains Overweight on construction sector
KUALA LUMPUR: RHB Research remains Overweight on Malaysia’s construction sector, underpinned by the strong earnings visibility, mainly due to the RM73bil Klang Valley Mass Rapid Transit (KVMRT) project that will keep players busy until 2021.
In its research note issued on Wednesday, it also saw opportunities for players in the public housing segment as well as in Sabah and Sarawak Corridor of Renewable Energy (SCORE).
“Our Top Picks for the sector are Gamuda, Protasco and Hock Seng Lee,” it said.
RHB Research said investors should stay invested in the construction sector due to the record or close-to-record outstanding orderbook for most players at present.
It also expected more new jobs in the pipeline including the Klang Valley MRT Line 2 project, Kwasa Damansara, the Refinery & Petrochemical and Integrated Development (RAPID) project in Pengerang, several new toll roads, as well as Track 3A and Track 3B power plant projects.
The research house said the KVMRT project was the main pillar of support to the current upcycle due to the massive contract value of RM73bil.
It pointed out the KVMRT would have a positive impact along the entire value chain of the sector, creating orders for management, general and specialist contractors, as well as suppliers of various building materials.
Another factor was the KVMRT’s long construction period of about 10 years from 2012 to 2021.
“We believe Gamuda (Buy, Fair value: RM5.45) is the biggest beneficiary of the project.
As for Protasco, it would be the key player in public housing due to a RM1bil allocation for the Housing Facilitation Fund under the 2014 Budget.
RHB Research said Protasco (Buy, FV: RM2.18) has thus far secured the highest number of public housing contracts.
As for Hock Seng Lee (Buy, FV: RM2.06), it is the best construction proxy to Sabah and Sarawak and SCORE.
It expected infrastructure projects to be rolled out under SCORE (roads, water supply and port); urbanisation (flood mitigation, waste management and traffic diversion); and rural development (roads, water supply and housing).
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